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Intel did not offer full-year financial forecasts, as usual.
Alexander Koerner / Getty Images
Investors have rewarded in recent weeks
Intel.
The company recently announced a new CEO and attracted a powerful shareholder of activists.
Now it seems that managers are disappointing some who have become more positive about the prospects of the company. It said Thursday that it would essentially double its strategy of making chips itself, rather than making another specialist rather the semiconductors.
Shares of Intel (ticker: INTC) fell 8.3% to $ 57.26 on Friday.
Popular incoming CEO Pat Gelsinger on Thursday did little to help the stock during a call with analysts and investors. In his opening speech, Gelsinger says that after reviewing Intel’s progress with the perfection of next-generation manufacturing technology, it will be committed to building the majority of chips under its own roof. But at the same time, he said the veteran disk manufacturer would have to look outside and hire more companies to help meet his needs.
“Based on the initial reviews, I am satisfied with the progress made with the health and recovery of the 7-nanometer program,” Gelsinger said. ‘I am confident that the majority of our 2023 products will be manufactured in-house. At the same time, given the breadth of our portfolio, it is likely that we will expand our use of external foundries for certain technologies and products. ”
Investors wanted a clear decision on how Intel’s next-generation chips would be manufactured, but they did not get one. There was also a lack of clarity about the profit outlook.
Intel did not issue full-year financial forecasts, as the company usually does during its fourth-quarter calls, and only told investors that it had first-quarter non-GAAP earnings of $ 1.10 per share on the sales of $ 17.5 billion. The number does not exclude the memory business that Intel sold last year.
On the plus side, current CEO Bob Swan – for whom the board is opening the door on February 15 – explained that Intel’s engineers essentially solved the yield issues Intel had with the so-called seven-nanometer manufacturing technology.
To increase the processing power of chips and remain competitive in the semiconductor industry, companies must constantly invent new ways to shrink the transistor building blocks of chips and squeeze more of them onto a piece of silicone.
This is now an engineering problem at the atomic level, which makes the production of chips difficult, complex and expensive. And
Taiwan Semiconductor Manufacturing
(TSM), a competitor of Intel and regular business partner, is very good at making chips.
Chris Caso, analyst at Raymond James, summed up the problem with Intel’s plan: ‘The problem with the strategy is that even though Intel is successful at 7pm, they are still a hub behind TSMC. And we do not think [Intel] can deliver leadership products without leadership in transistors because it has never been done before. It holds [Intel] behind the industry for another four years. ”
That Intel will continue to make its own chips sounds to Mark Lipacis, an analyst at Jefferies, like an announcement that it’s using the next generation of technology again. Managers have earlier told investors that they plan to send its next generation of processors by the end of 2022. Investors say making the 2023 chips internally will again indicate that the products are being delayed.
While the lead for the first quarter looked good, Intel’s delay in presenting true clarity on its manufacturing strategy until later this year makes it difficult to recommend the stock, wrote Mitch Steves, analyst at RBC Capital Markets. He assesses the share the equivalent of a sale, and repeats the call due to the company’s uncertainty about its future.
Intel shares have declined nearly 10% in the past year as the standard PHLX Semiconductor index climbed 60%.
Write to Max A. Cherney by [email protected]